American Express is paying $112 million in refunds and fines

WASHINGTON (AP) — American Express is paying $112 million in refunds and fines to settle regulators' accusations that it charged unlawful late fees and deceived customers to pressure them to pay off old debts or buy extra credit card services.

The director of the Consumer Financial Protection Bureau, Richard Cordray, said in a statement that the company violated consumer-protection laws "at all stages of the game — from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt."

American Express to Refund $85 Million

(Moderator note: the post below is taken directly from the NY Times article mentioned in the post immediately above.)

American Express will reimburse $85 million to about 250,000 customers to resolve accusations that the company violated federal law in its marketing, billing and debt collection practices, the company and the government said Monday.

The settlement is the latest in a series of enforcement actions that federal and state regulators have brought against some of the nation’s largest financial institutions for problems in their credit card businesses.

The multiagency investigation of American Express included the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions. They discovered problems in three American Express subsidiaries between 2003 and 2012 that ranged from the way the company advertised its cards to how it pursued customers behind on their bills.

The violations of consumer protection laws started “from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” Richard Cordray, the director of the consumer protection bureau, said in a statement.

To win customers for its “Blue Sky” travel reward credit card program, the lender sometimes offered them a $300 reward, which never materialized, the regulators said. In doling out credit, they said, American Express also discriminated against applicants based on their age. The company also duped consumers into paying off stale credit card debt with the promise of improving their credit score, the investigators said; in fact, regulators found, American Express was not reporting the payments to the credit bureaus at all.

The three subsidiaries involved in the agreement are American Express Centurion Bank, American Express Travel Related Services Company, and American Express Bank FSB.

American Express, long known for its aspirational cards and tonier customer base, said it had outlined plans to address each of the violations and “cooperated fully” with regulators.

Under the deal with regulators, the company must halt the deceptive practices and set up independent auditors to ensure that its practices comply with consumer protection laws.

The fines and customer refunds will be paid, for the most part, by reserves established in prior quarters, American Express said.

“Separately, the company is continuing its own internal reviews and is also cooperating with regulators in their ongoing regulatory examination of add-on products in accordance with an industrywide review,” American Express said in its statement.

The move against the bank is part of a broader push by federal and state regulators to protect consumers from illegal credit card and debt collection practices as millions of Americans struggle to pay their bills in a floundering economy.

So far this year, the newly minted Consumer Financial Protection Bureau has leveled enforcement actions against Capital One and Discover Financial over sales tactics of credit products. Last week’s action against Discover resulted in the company agreeing to pay $200 million to more than 3.5 million cardholders who bought credit protection services over the phone, plus an additional $14 million in civil penalties to banking regulators.

Monday’s enforcement action was “intended as a message to all entities,” said Kent Markus, assistant director of enforcement for the consumer bureau. “There are consequences for violating the law.”

Re: American Express to Refund $85 Million

Interesting tidbit in the fine print. Certain Inqs in 2010 associated with a decline may be getting removed within the next 30 days.

I didn't read that far honestly, but given that inquiries fall off after 24 months, even 12/31/10 is only 3 months away anyway and they stopped scoring at least 9 months ago. Hardly game changing, now if they wanted to remove my Zync inquiry from 09/12, hey be my guest .

Re: American Express to Refund $85 Million

Maybe this is why they're dumping the zync They're poor now and don't want to risk anything on us low credit people

I really don't know, the subprime market is profitable and everyone wants a slice. Prime is red ocean, subprime may not be entirely blue ocean still but there's lots of open space in the market.

The fee is roughly 10% of last year's earnings, absolutely non-trivial but it's not going to be financially crippling. Admittedly according to the similar investor relations releases, Amex has the lowest default rate in the industry: maybe they were seeing a trend in Zync holders they didn't like. It's so hard to know when I doubt much will be officially posted.

I guess one of the the other ways this forum is atypical is while people don't usually find it until something is realized to be ugly on their credit report, the denizens of this forum are probably less likely to repeat past mistakes than the average population too, so analysis of default rates from here borders on impossible.

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